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Recently, there has been significant turmoil surrounding the electronics component sector, specifically in wireless equipment and semiconductors. This was mostly due to the US blacklist of Huawei in May, coupled with increased US-China trade war tensions.

Huawei is the world’s largest telecommunications company, and therefore is a large purchaser of electronics components from companies in these industries. This means that Huawei will no longer be able to purchase components from US companies, and faces export uncertainties with the trade war raging. In fact, these headwinds just led the company to announce that it will likely make $30 billion less revenue this year and next than previously projected.

Over the past month, the wireless equipment industry took a 3.86% hit and the semiconductor industry fell 5.08%. The decline is due in part to Huawei’s downbeat outlook, combined with certain US companies like Google GOOG suspending some business with Huawei.




Positive Outlook

However, things are starting to look up for these industries to start the week. Microsoft MSFT on Monday announced that it would resume sales of Huawei laptops from the Microsoft store. It is beginning to seem that companies like Microsoft are willing to look past the political uncertainty to continue to provide support for revenue generators like Huawei.

On top of the Microsoft news, President Trump announced Tuesday that he will have an extended meeting with President Xi Jinping of China at the G-20 summit in Japan next week. This raised hopes that the trade war will be resolved soon, instead of dragging out for months.

As a result, many chipmakers bounced back Tuesday on hopes that the tit-for-tat tariff fight might end and that Huawei’s blacklist status could be lifted. Wireless equipment companies climbed, with large player Qualcomm QCOM up 4.12%. Meanwhile, Broadcom Inc. AVGO climbed 4.54% today and Intel INTC 2.66%, as both chip firms are major Huawei suppliers.

Two other affected stocks to watch are Nvidia NVDA and Amkor AMKR. Amkor is a Zacks Rank #1 (Strong Buy) and sells products diversified into 5 end markets, making it a strong pick. Nvidia has taken a tumble recently but seems to have turned around, it has great exposure to high growth markets like gaming, AI, and autonomous vehicles making it a potential for quick growth depending on the market in the near future. Our Zacks consensus estimates show a projected 6.93% price drop for this year, but a strong 20.97% bounce back in 2020 that could be even higher if any of these high growth markets take off.

If trade disputes are resolved in the coming days, these wireless and semiconductor firms stand to benefit, along with much of the rest of electronics component market.

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